It was either the beginning of everything, or the end. Twenty-five years later, hardly anyone can agree whether the third and final Isle of Wight Pop Festival - with its pitched battles and its moments of total collective euphoria, its bad trips and numberless private epiphanies in sleeping bags under the starts - represented the bitter death-cry of the pure hippie dream or the radiant dawn of hip capitalism.

On a dozen acres of land by Freshwater Bay, in the last week of August 1970, between a bright Wednesday morning and a drizzly dawn the following Monday, something happened that those who were there will never forget. Exactly what the sensation of it was depended where you were, whether you were up on the hill with the rebellious tens of thousands - the ancestors, as it turned out, of succeeding generations of crusties and travellers - who refused to pay the £3 weekend admission fee, or in the VIP enclosure in front of the stage, where Germaine Greer sat knitting like some rock'n'roll tricoteuse while band after band went to meet its destiny.

Most of the memories are happy ones, to do with being young at a fortunate time and sharing things: food, soft drugs, music, a sense of community. People still talk fondly of the Who playing Tommy while giant searchlights fingered the heavens, or of Jimi Hendrix's last gig in Britain. They remember Leonard Cohen and the Doors (particularly the performance of an out-of-it Jim Morrison), perhaps even Free and Jethro Tull. Others remember a darker side: the acrid smell of anarchy, the blazing chip van, the distraught PA pleas for order, the Coke cans hurled at the stage as Kris Kristofferson tried to sing Blame It On The Stones, the bad acid, the backstage bust-ups over billing and money.

Just about all the festival's tensions and contradictions were contained within an hour on the Saturday afternoon, just after Joni Mitchell had taken the stage.

By that time, the fourth of the festival's five days, we were all assembled, 600,000 of us. Later on, people said it had actually been 500,000, maybe even only half that. Anyway, it was the biggest crowd any of us post-war babies had been part of, and we were revelling in an unfamiliar, intoxicating combination of power and irresponsibility. Our flags flew like the battle standards of a medieval army, while the smoke from the numberless joints drifted in the air. The memory of the previous day's mass drug busts on the way to the site had evaporated in the sunshine. The latrine trenches were not yet full. The tie-dyed John Sebastian had just finished setting up the vibe with a two-hour set. And now the new queen of Laurel Canyon, arrived in her long yellow dress, strumming the opening chords of Chelsea Morning.

And stopped. "I don't feel like singing that song so much," she said.

What we didn't know was that, on the way from the ferry to the festival with her friend Neil Young and her manager Elliot Roberts, their chauffeured Rolls-Royce had been stopped by the police. Finding something suspicious about Robert's person, they arrested him. Young, who had been planning to make a guest appearance, returned to London.

Now, setting down her guitar, Mitchell moved to the piano and started to play Woodstock, the anthem of pop festivals. But before she could get further there was a commotion in the VIP area in front of the stage. "Help," someone was shouting. "We need a doctor!" And all eyes turned to the swaying twitching scarecrow figure of a freak on a bad trip.

Now we were not in the Woodstock fantasy but the Altamont nightmare. Mitchell, shaken, continued the song while attempts were made to take the acid-tripper away. But she hadn't go much further when a bearded figure appeared on stage, grabbed the microphone and began to read from a piece of paper: "This is a very important message for the people of Devastation Hill..."

Before the intruder - an American - could blurt out much more than a few words about how this festival had turned into "a psychedelic concentration camp", a posse of stagehands had started to pull him away. The crowd, intoxicated by their brief involvement in the turbulence of the authentic counterculture, began to chant: "Let him speak...Let him speak..."

Mitchell, angry and trying to recompose herself, delivered a scolding to those who dared interrupt her performance: "Last Sunday, I visited a Hope ceremonial dance in the desert, and there were a lot of people there and there were tourists who were getting into it like Indians and Indians who were getting into it like tourists. I think you're behaving like tourists, man. Give us some respect!"

Joni got her four encores. Not even another unscheduled arrival on stage, of a man with a pair of bongos, could prevent her turning the mood back to one of benevolence. And when a brightly colored hot-air balloon floated into view above the stage canopy, we turned our eyes to the sky and cheered as if to welcome a vision of the new age.

At tea-time, Tiny Tim strummed his ukulele and, amazingly, got the crowd to sing along with There'll Always Be An England and Land Of Hope And Glory, followed by Miles Davis, Ten Years After, Emerson, Lake and Palmer (setting off cannons and launching a new genre, pomp-rock), the Doors, the Who (whose set straggled on until half past four in the morning), Sly and the Family Stone, the heroes of Woodstock, who came on shortly before dawn broke and played for less than half an hour before disappearing with the promise - vain, as it turned out - to return the next night.

But the aggravation was not over. It had stirred itself more than a week earlier, when the first arrivals at East Afton Farm pitched camp on the downland between the festival site and the sea and ripped up the organisers' initial attempt to build a wall intended to keep freeloaders off what became known as Desolation (or Devastation) Hill, a conservation area that offered a free view of the stage. That was the beginning of a war which culminated on the final afternoon in the bitter defeat of the organisers, who were forced to declare that the third Isle of Wight Pop Festival was now officially free.

For some people, it turned into a nightmare of bad vibes. "POLICE IN DRUGS WAR ON HIPPIE ARMY" was the front page headline in the London Evening News. "I was dealing with all the thousands of kids who'd been busted," Caroline Coon says now, remembering the days and nights in the Release tent, taking names and addresses and assigning a team of five volunteer lawyers to the summary hearings in the local magistrates' court. "There were lots of plain-clothes policemen mingling with the crowd. And when the kids got into court, the police were telling them they had to plead guilty. But the police didn't have drugs-testing equipment and most of the kids themselves didn't' know what they were carrying. In those days you got high smoking banana peel."

On the other side there were the militant radicals, led by a French anarchist, Jean-Jacques Lebel, who had been prominent in the Paris riots of May '68, by various American hippies and by Mick Farren, the singer with the Social Deviants. Farren had organized the previous month's Phun City festival at Worthing, where the bands played for nothing and those present thought they were at the birth of a great free-festival movement that would sweep aside the straight world in a tidal wave of love, peace, dope and sex. While Lebel and the Americans led the raiding parties against the corrugated-iron walls, Farren issued White Panther communiqués denouncing the organisers and demanding free admission and free food through the FREEK Press, an almost hourly newsletter edited by a bunch of alternative press workers from Oz, IT and Friends, including Richard Neville.

The event took on a momentum which left its organisers, the three Faulk brothers and their company Fiery Creations, reeling from crisis to crisis. "There were feelings of gratitude and pride at having been involved in such an enormous undertaking," Ray Faulk said, summing up his feelings 25 years later. "But on the other side, the overriding feeling was one of losing money."

While Ron Faulk, an estate agent, then aged 26, masterminded the publicity campaign and Bill Faulk, 24, a College of Art graduate in film and TV studies, looked after the layout of the festival site, it was Ray, a 25-year-old printer, who had devised the double-wall system around the site to ensure security and provide an artery of communications; the broad channel between the walls allowed Securicor guards to carry the plastic bags of cash from the entrance gates to the main office and permitted festival staff to move around. It also presented a double barricade to an impromptu coalition of anarchists, hippies, "White Panthers", Hell's Angels and - believe it or not - a contingent of Young Liberals, whose collective efforts to batter the wall down ultimately led to the organisers' capitulation.

"It was a real vulgarisation of the hippie ideal," Coon says. "Anarchy is always a parasite. They weren't liberating the Food Hall in Harrod's, were they? It was shocking to see how they all enjoyed being so violent. It was mayhem." And for some participants, the chaos took years to sort out.

The principal victims were the Faulk brothers - a rather shy, modest trio who recognized the need for the showman's ebullience of their front man, Rikki Farr, whose repeated denunciations of the "wreckers" failed to stave off disaster. Their first two IoW festivals had been relatively straightforward affairs: about 15,000 people had turned up in 1968 to listen to an all-night bill topped by Jefferson Airplane and Tyrannosaurus Rex, while almost 10 times that number arrived the following year for the three-day event which became synonymous with the appearance of the remodeled, white-suited Bob Dylan. Their success led the brothers to think in terms of broadening the event into a general arts festival; but in 1970 their ambition overwhelmed them, and their plans came crashing down.

Everybody was paid, eventually - the artists got their money, either in advance by banker's draft or on the night in cash (Joan Baez, notionally top of the bill, received about £10,000, while Tiny Tim refused to as much as tune the strings of his ukulele until he got his full payment) - but the over-all finances, bound up in a deal to make a Woodstock-style movie of the festival, were in a terrible mess, compounded by rocketing overheads, notably the costs of security.

It would be easy to say that the music was incidental, a sideshow to a culture simultaneously celebrating and in conflict with itself, but it would not be wholly true. There were plenty of disappointments during the festival (notably Sly and Family Stone and the Doors), longeurs (principally Chicago, whose three-hour set felt like three months) and moments of hilarity (a "poem" recited in a broad Brummie accent by the Moody Blues' drummer, Graeme Edge, which went something like "Why are we here? / Who put us here, / And to what purpose?"). Sheer exhaustion meant plenty of people missed the pre-dawn performances of Leonard Cohen and Richie Havens.

What worked most effectively on the crowd was the loud blues-based rock of the second-division bands like Taste and Free, whose All Right Now was a theme of the festival, whether played live by the band on Sunday afternoon or spun on the turntables of the festival DJs, Jeff Dexter and Andy Dunkley. Outside the mainstream, it was quite something to hear hundreds of thousands of people applauding Miles Davis's sophisticated electric jazz, and to watch the Voices of East Harlem, a group of school kids, winning over a crowd which had never heard of them (nor would again) with gospel driven versions of Sing A Simple Song Of Freedom and For What It's Worth.

"Some people had a really great time," Coon concludes. "Very, very stoned and groovy. But it wasn't much fun for me. The Release workers were very vulnerable. We couldn't indulge in any mind-altering substances. It was grim, because we spent all our time looking after people on bad trips, and seeing how people were being planted and harassed by the police. When the last day was coming to an end, we thought at last we could go and enjoy some music. I wanted to listen to Hendrix. But it got later and later, and when he did arrive it was in a pretty down state. And there was always the feeling that we were going to be either arrested by the Establishment or kicked to death by Mick Farren and his mates. so even Jimi didn't quite lift us enough."
Still, as Hendrix said just before he left the stage, in what turned out to be his valediction to Britain, "Thanks for being so patient. Maybe one day we'll do it again. Peace and happiness, and all the other good shit..." Eighteen days later he was dead.

"Well, the show kept running for five days and five nights after all," Ray Faulk remembers, "even if it did take the next five years to pick up the pieces. And I think that as long as you didn't have a bad trip or you didn't split up with your girlfriend, you probably had quite a good time, really."